Net profit slumps at electronics giant Philips as restructuring erodes gains from higher sales

PARIS – Royal Philips NV, the world’s biggest lighting maker, said Tuesday higher restructuring costs wiped out gains from higher sales to reduce first-quarter net profit by 27 per cent to 100 million euros ($109 million).

Sales rose 14 per cent to 5.34 billion euros, as a strong growth from Philips so-called “Consumer Lifestyle” division, which incorporates anything from dental hygiene to kitchen appliances and hair removal tools, offset slow or falling sales from its health care and lighting divisions.

Restructuring costs, related to the company’s split, totalled 58 million euros. Philips, which began life as a lighting company in 1891, last year announced an up-to 400-million-euro plan to split off its lighting business to create two separate companies. The move is aimed at making it easier for the lighting arm, seen as a dominant seller of LED lights, to break into new markets.

CEO Frans van Houten said “investments, coupled with negative currency effects, are the main reasons for the low profitability” in Philips health care business, which competes with GE and Siemens in the hospital scanner business. Houten took direct control of the division himself last year after previous health care boss Deborah DiSanzo departed amid poor results.

Philips also said preparations to split off the lighting business would take “at least until the end of 2015,” with an IPO to follow in the first half of 2016. Alternatives to an IPO are also being considered, Philips said.